US companies need to take a hard look at the CEOs of potential target companies in Latin America.
BY LATINVEX STAFF
US companies planning to buy
assets in Latin America need to be aware of the ethics risk, warns Frank
Holder, the chairman of Latin American at FTI Consulting.
“If the culture is incompatible, you should look for
another company to acquire,” he advises.
Holder is the author of Integrity in Business: Developing Ethical Behavior
Across Cultures and Jurisdictions. Using
his research from a review of significant fraud cases, legislative mandates and
governmental and nongovernmental initiatives over the past 15 years, his book
provides a guide to understanding and adopting an holistic business integrity
strategy that has a realistic chance of protecting an organization from the
kind of catastrophic loss or reputational damage that can easily be the result
of an error of judgment in a world that is increasingly connected and driven by
instant and social media.
He began his career with the U.S. Air Force as a
political-military analyst for the U.S. embassy in Argentina and as a special
agent for the Office of Special Investigations at Langley Air Force Base in
He then founded Holder Associates in Buenos Aires, Argentina, a risk mitigation and
business intelligence firm he later sold to Kroll. At Kroll, Holder served as
president of Kroll Inc.’s Consulting Services Group, responsible for operations
in more than 35 countries and was head of Kroll’s Latin American and Caribbean
region. Then in In 2005, he founded Holder International, which
was acquired by FTI Consulting in 2007.
Holder, who is also the author of Narcotics
Trafficking: A Constructed Typology of the Deviant Market for Illicit Drugs,
has taught courses in political science
and law on the inter-American system at Universidad del Salvador, Buenos Aires,
and has spoken and published widely on risk management, national security,
operational risk and money laundering.
Latinvex asked him about business integrity in Latin America
compared with the United States.
How easy or hard is it for
big multinationals, constantly acquiring new companies in places like Latin
America, to maintain the necessary integrity?
is not always easy, but the first step is ascertaining whether the culture of
the company to be acquired is compatible with yours. This requires significant
diligence. If the culture is incompatible, you should look for another company
to acquire. This is because one of the most powerful tools for maintaining
integral behavior is tone from the top. One common element that we find in
major ethical breaches or integrity breaches is that there is no clear top-down
message from the CEO saying, “We will not tolerate corruption, we will not
tolerate unethical acts; this is what our code of ethics is and this is what we
live by.” Sometimes it’s difficult for that tone to reach every corner of
the world at a company, but it’s incredibly important because in today’s world of
social media and all the different technological platforms that bring things to
your doorstep immediately, an ethical problem in Kazakhstan is just as bad as
one in New York. It’s going to hit New York in a matter of seconds. You
have to work really hard to make sure that clear, strong tone gets out there.
It’s also important to understand the culture of the market you are trying to
enter, and make sure that you have a method and a plan for imposing the
non-negotiable code of conduct or ethics that your company represents across
CONTROLLING SHAREHOLDER MODEL
How would you compare Latin
American companies versus US companies in terms of integrity?
American companies in general still follow a controlling shareholder model, so
even if they are partially publicly-traded there is a clear leader of the firm.
This is both an advantage and a disadvantage. The advantage is that it is less
likely for one of these firms to have a rogue management team commit major
breaches of integrity undetected and undeterred. The disadvantage is that
if the controlling shareholder is not accustomed to or simply doesn’t follow
international standards of compliance and integral behavior there are fewer
checks and balances to counteract the lack of tone from the top. US
companies have a tendency to be more accustomed to a strong regulatory
environment and to be more sensitized to the need for self-policing and
investment with regards to integrity, although Latin American firms are rapidly
Why did you decide to write
Integrity in Business?
wrote my first book in conjunction with my PhD dissertation many years ago. I
enjoyed the process of writing but since then I got very busy with life. I
worked for the government for a while and then I started my own consulting
firm, which I eventually sold to Kroll. I worked for Kroll and then left after
a number of years to start my boutique consulting firm again, which I then sold
to FTI Consulting almost seven years ago.
that busy period, I spent some of my free time being a university professor in
a variety of countries. I really enjoyed it. I gave seminars at universities
like Georgetown in the U.S. and was a professor at two different universities
in Argentina. I eventually ran out of time for teaching and moved to media,
newspaper and TV interviews while writing a number of thought leadership
articles. But that wasn’t significant enough to me - I wanted to do something
had been considering writing a book about the professional services industry
for some time and wanted to write about what I have learned out in the field at
FTI Consulting. Despite my management responsibilities, I spend the majority of
my time working with clients all over the region. There is a lot of valuable
experience you gain from doing that.
How were you able to write
it in light of your hectic schedule as Chairman of FTI Latin America?
sleeping is helpful. I had help, but it also took me nearly two years. I put
together what I thought was a great outline, which is incredibly important when
you are writing a book. When you outline it, you are clear on what you want to
say and you are clear on what you want the chapters to look like and such. The
book sort of wrote itself after that. But it did take a long time.
How has the reaction been
been well-received so far - we’re about to publish in Spanish so it can reach
additional markets. My biggest critic actually has been my father, who sent me
a lengthy hand-written note with his thoughts and assessment!
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